A cow which had trampled a 57-year old rambler to death after having escaped, and which had then disappeared into the forest has been caught again. The cow was anaesthetised to enable the police to collect forensic evidence of her guilt (or otherwise) and then returned to her owner.----------------------------------------Bavaria 12 September: Am Montagvormittag, 12. September, ist ein 67-jähriger Landwirt durch eine Kuh schwer verletzt worden. Das Tier sollte gegen 10.45 Uhr auf einem Hof in der Langen Gasse auf einen Viehanhänger verbracht und zum Schlachthof gefahren werden. Offenbar ahnte die Kuh, was ihr bevorstand; sie wehrte sich vehement...

A 67-year old farmer was badly injured when he tried to load a cow into a transporter to take her to the slaughterhouse. The cow appears to have guessed what was afoot and defended herself vigourously. She fled to the hayloft. The farmer tried to drag her down again with a rope tied to her but was thrown against the wall. He was taken to hospital with serious but no life threatening injuries.----------------------------------------Mecklenburg-Vorpommern 15 September: Eine 56 Jahre alte Bäuerin ist im eigenen Stall in Scharstorf Landkreis Rostock von einer Kuh angegriffen und tödlich verletzt worden. Wie ein Polizeisprecher in Rostock sagte, stieß das trächtige Tier ihren Schädel ohne erkennbaren Anlass der Frau zweimal gegen die Brust....

The badly mutilated body of a 51-year old farmer was found in a meadow by his brother. It is not clear whether he was murdered by humans or by cows.----------------------------------------Rhein Zeitung, 19 September: Gefährliche Angriffe von Kühen sind gar nicht so selten, wie mancher vielleicht annehmen würde. Hier ein Rückblick auf Fälle in Deutschland, der Schweiz und Österreich...

These blokes are muscling in on my territory. They point out that cow attacks are quite common and then list a dozen incidents in the past year-and-a-half. A dozen? They're not even trying, are they?

Tory MP Nick Boles took his first tentative step over to The Dark Side on page 15 of today's FT:

... there is a version of the Land Value Tax that works – and it is in operation in New South Wales in Australia. Crucially, farmland and people’s main homes are wholly exempt so it does not strike at hard-pressed farmers or elderly people on low incomes living in houses that have become very valuable (3), which would be hit by the Liberal Democrats’ preferred mansion tax.

Instead, the tax bears down on vacant land, holiday homes, investment properties and commercial properties. If we were to implement it in the UK, it would need to be deductible from business rates so that struggling retailers and other firms were not faced with a devastating double whammy – and it might in time replace business rates altogether.

Thus targeted, the tax would deter speculative land banks and would encourage property owners to develop brownfield sites and put rundown areas of inner cities back to good use. Over the longer term, it would lower the price of development land and help us get off that quintessentially British rollercoaster of house price booms and busts.

Well worth a read. The FT allows a Home-Owner-Ist to get his retaliation in first on page 3:

Mark Pritchard, secretary of the 1922 committee, who led the right’s attack on Mr Boles and other "purple plotters" last year, said on Thursday that he disagreed with Mr Boles’ latest proposal.

"This is a regressive tax masquerading as a progressive tax (1) ... over time this land value tax would lead to a decrease in pension funds (2) that invest in property portfolios and for which millions of pensioners rely on for decent returns in retirement (3). British businesses already pay enough tax. (4) What is needed is for the state to be smaller (5) and for government to learn how to spend taxpayers money far more wisely. (6)"

1) He appears to see 'progressive' as A Good Thing and 'regressive' as A Bad Thing, fair enough, let's examine the rest of his comments in this light (for example, they could make the LVT very progressive indeed by simply doling out the money as extra Citizen's Pension, full stop, I'm sure he'd be none too chuffed with that idea).

2) By and large, pension funds are run for the benefit of pension fund managers, not pensioners. Their very existence is inherently a 'regressive' redistribution of wealth.

3) Nick Boles plays the plain vanilla version of the Poor Widow Bogey (i.e. that it is unfair to tax unearned income or gains), but the 1922 guy goes for an interesting variant. Does Mr 1922 have the slightest bit of evidence for his claim? He also knows f- all about tax or maths, simple fact is, if they applied full Business Rates to unused land, the amount of money you can make by bringing them back into use is far in excess of the Business Rates (by definition), so pensioners would end up better off (and who cares whether that's progressive or regressive).

And if these pension funds invest in residential, they are probably collecting rents from young people, so this is merely a mildly regressive form of wealth transfer from young workers to old people who have built up a pension fund, and to pension fund managers of course. And the more that today's young people have to pay in rent (or mortgage interest), the less they will have to save up for their own retirement, so the Ponzi scheme is self-perpetuating.

Either way, Mr 1922 lets the Home-Owner-Ist mask slip: despite its stated aims, in reality, Home-Owner-Ism has absolutely no intention of encouraging a wider spread of owner-occupation. The whole idea is for future generations to be tenants so that the incumbents (pension fund managers, bankers, landlords etc) can live off the rental income.

4) Agreed. But if pension fund managers spend all the money entrusted to them on vacant, derelict and unused sites, that constitutes a business how, exactly? It's not, is it? It's one of the least productive uses of money you can imagine, as we can't all live off capital gains, remembering that these are a negative sum game overall. Further, if and when these sites are brought into use, they will be liable to Business Rates anyway (which isn't a tax on business either, not in any way shape or form).

5) Agreed. In the later article, the Tory MP makes it perfectly clear that he's plumped for this moderate form of LVT as a "least bad" option and sees it as a way of stimulating business activity (which would generate returns on the shares held in pension funds, so their net overall income would go up; creating more jobs etc.) as well as a replacement for other, more damaging taxes. He singles out Employer's NIC as something which could be reduced, for example.

6) The Tories ARE the f-ing government, so that's not much of an argument is it: "I'm sorry that we can't shift from bad taxes to good taxes because we're only going to waste it all anyway"? When it comes down to it, it's less bad for the government to waste LVT receipts than to waste VAT or NIC receipts, and that is the end of that.

Everyone I know hates them. But really, they're just salesmen, doing a hard sell. They're no different from the guy knocking on your door with his "we're just in the area" double-glazing pitch. They're just salesman. And the product they're selling is a salved conscience.

Which gave me the opportunity to say something I've been meaning to say for ages in the comments:

As to chuggers, this is where the analogy with private business breaks down.

If you pay a salesman £20,000 and he drums up business with a net profit margin for you of £21,000, then he is worth employing. But to get your £21,000 net margin, the salesman has to make gross sales of £100,000 or £200,000 or whatever.

So the salesmen's total income is still only a small percentage of your total turnover or total costs.

Apply the same logic to charities, and you end up with the ludicrous situation that 90% of their gross income goes on fundraising (seeing as they are all scraping from the same barrel) because the profit margin from a donation IS the donation.

e.g. my sister once had one of these jobs, she said "As long as the donations I can get in are more than my salary plus overheads, then they will keep employing me".

So if that charity can employ ten people on £20,000 each (incl. overheads) and they manage to drum up £210,000 donations in total, the manager of that charity considers this to be a storming result. Actually it's complete and utter bollocks, and a massive destruction of wealth.

If we cut out the middleman, the business of these charities is actually creating employment opportunities for young people. They 'keep them off the streets' by giving them a bucket and a brightly coloured T-shirt and then, er, sending them back on to the streets.

So it would be far more honest for them to say that the actual purpose of the charity is to channel money to young people who have been frozen out of the jobs market (a worthy aim in itself), and that for every £1 you give them, they pass on 10p to another worthy cause (be that RSPCA, Friends of the Earth, Macmillans, whatever).

I'd probably be far more generous if they put it like that, because I do feel very bad about youth unemployment, tuition fees, high house prices and all that stuff.

Most people would be barred from adopting their own children because of the rules imposed by social workers, the head of a children’s charity said yesterday.

Anne Marie Carrie, of Barnardo’s, said couples coming forward to adopt were treated with ‘enormous suspicion’ and their treatment was a tragedy both for them and the children left languishing in state care...

Earlier this year Children’s Minister Tim Loughton said the apartheid-style race rules that have long prevented couples adopting a child of a different ethnic background would be swept away.

But social workers still insist on extensive home trials of would-be parents and exhaustive examinations of both their parenting skills and their attitudes and thinking. Middle-class couples regularly complain that they are effectively bullied out of trying to adopt.

I only know one couple who ever tried to adopt (they are mixed-race, if I'm still allowed to say that, and the nicest and most middle of the road couple you can imagine, with a perfectly well brought up little lad) and after a few years of being humilitated, they just gave up.

Barnardo's is a fakecharity of course, and a year ago they were saying exactly the opposite to what they are saying now, but hey.

Denis Cooper emailed me his letter to The Telegraph with permission to reproduce. To cut a long story, the EFSF has no legal base in the EU treaties anyway, and its proposed permanent successor the ESM cannot be set up until the EU Treaty is amended (which requires UK consent).

Our MPs could stop the ESM coming into force by blocking the forthcoming Bill to approve the amendment (as proposed by Decision 2011/199/EU). With that EU treaty change killed off, it couldn't be used for any other purposes, including agreeing to a Tobin tax in the eurozone (or imposing it on UK banks, for that matter).

Here's his letter in full:

Sir

If European Commission president Jose Manuel Barroso wished to introduce a financial transactions tax just in the eurozone (editorial, today), then he could probably do that without needing any further EU treaty change beyond that already [provisionally] agreed [but not yet ratified] on March 25th.

Such a tax could easily be represented as one component of a "stability mechanism" to "safeguard the stability of the euro area", and would therefore fall within the scope of the new paragraph which would be inserted into the EU treaties through European Council Decision 2011/199/EU "amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro".

Therefore under that EU treaty amendment the eurozone governments could agree among themselves to impose the tax just within the eurozone, and as the UK would not be a party to that intra-eurozone treaty or agreement it would have no say over its contents and would have no veto to exercise.

I wonder whether the government will now reconsider the wisdom of so readily assenting to European Council Decision 2011/199/EU back in March, and decide that it will not proceed with the Act of Parliament which is necessary before it can be finally ratified by the UK.

Yours etc

NB. European Council Decision 2011/199/EU is here. It would insert this paragraph into the EU treaties: "The Member States whose currency is the euro may establish a stability mechanism [the ESM] to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality." which could easily be interpreted as giving the eurozone state governments the right to agree to a financial transactions tax just within the eurozone.

Somebody I wouldn't know from AdamEve emailed me yesterday: Hi my name is Teresa I bought a silver tea pot I was wondering if it might be real? It has a W with a V on top of the W with what looks like an olive leave on top of the V its a branch with three leaves on it. It has some numbers but I don"t have it in my hands at the moment. Do you have any idea what the sybole is? I have been on the web for hours looking for the markings, but I have no idea what I am doing can you help me?

Me: Trying pouring water into it. If the water goes straight onto your leg, it is a "virtual" teapot, generated by 3D projectors. If the water stays in, the chances are the teapot is "real". You can also try tapping it with a spoon, if it makes a noise it's probably "real", and so on.

Teresa: what is the mark that is on it? The legs are attached! Cigeret ashes polish it as well doese that mean anthing? If it is real do you have an idea of how much it might be worth? The handle is broken off. I don't have the handel.

Me: If you can still see the stumps of the broken off handle, then try sanding them flat and pretend that the teapot never had a handle in the first place. The good news is, if cigarette ash polishes it, then at least you can enjoy a cigarette while you are working without a guilty conscience.

Teresa: I was just wondering if it was worth anything? Sorry if Im bothering you! I bought it at a garage sale I paid a whooping .25 cents for it and saw the markings on it. I have been looking for days on the internet for the markings. I don't know anything about this kind of thing. I am sorry if I am bugging you. The legs are seppert they are welded on the pot. Beside the mark is the letters ACE under that is eather a O or a D not sure doese that help?

Me: If you bought it at a garage and it has the V and W insignia, it might well be a Volkswagen. Have a look where the engine is. If it's at the back it's probably a Beetle and if it's at the front it's probably a Golf or a Passat. The letters are probably the registration plate. Is there one at the front and one at the back?

UPDATE: just received: To the left of the mark toward the front of the pot is a V it is barrelly visible. To the left under the word ACE is the O it is towward the back. That is the only markings I see. I live in a small town called N.... and I am on dial up for internet I am verry sorry Im just a county girl and I really don't know a hole lot. You are very funny.

Wednesday, 28 September 2011

An argument advanced by Deniro and before that by The Fat Bigot (link below), which adopts the fairly standard Home-Owner-Ist practice of completely abandoning logic or facts or anything:

"have you thought that there may be political consequences of millions of people paying no tax whatsoever and all government spending being funded from people who own property.... Under LVT renters would pay no income tax, no duties , no VAT. My question is what would those who do fund Government say about that. And what would be the political power of the renters and the owner occupiers. Would the owners say no taxation without representation and no representation without taxation. Don't you think the political consequnnes of taxation are different from the economic distinction."

OK, ignoring the use of the emotive term "millions", conflating the terms "property" and "land" and the fact that "Under full-on LVT owner-occupiers would pay no income tax, no duties , no VAT" either, let's do facts and logic:

1. Everybody lives somewhere. Either you're an owner-occupier, a tenant or anything in between (such as living with your parents and chipping in towards costs).

2. Currently, about seventy per cent of UK households are owner-occupiers, just over ten per cent are private tenants and just under twenty per cent are social tenants (local council or Housing Association). UPDATE: Sobers addresses the issue of social tenants in the comments, that's the least of our worries.

3. Logic says, for every tenant there is a landlord.

4. So let's assume there are ten identical houses on the street, all owner-occupied and all paying the same tax, fair enough.

5. Now let's assume that (say) two of them are rented out, by a purely private agreement between landlords and tenants. The tax on those two houses is exactly the same as on the owner-occupied ones. Just to remind you of a bit of basic maths: each owner-occupier pays one-tenth of the tax due on that street. His tax bill is not affected, neither increased nor decreased, by the precise tenure of the other residents. Somehow or other, the landlord and tenant have to share that tax bill between them; either the rent is a fixed lower figure and the tenant pays the LVT on top; or the rent is a higher fixed figure and the landlord pays the tax out of the gross rent.

6. At this stage, what are the eight owner-occupiers whining about? The fact that the tenant doesn't pay enough, that the landlord pays too much, what? If the landlord thinks he's paying more than his fair share, then he can sell the house again, nobody's forcing him to be a landlord, yes?

7. As we also know, ignoring capital gains/losses, the cost of buying and the cost of renting are usually much the same. If the landlord decides to sell because he thinks that he was shouldering too much of the LVT, and the eight owner-occupiers don't want to shoulder it (which is what they were whining about in the first place), then who's going to buy that house? One of the tenants, of course, so hey presto, we now have more owner-occupiers, result! The selling price will adjust up or down until so that the tenant is no better or worse off than when he was renting. Call me old-fashioned, but I'd always assumed low and stable house prices and higher levels of owner-occupation to be A Good Thing.

8. In real life, higher taxes on land values and lower taxes on incomes lead to higher levels of owner-occupation, as we well know from all the studies. The Fat Bigot of course claims that exactly the opposite would happen: "There are no checks on how high the tax rate will be other than the ballot box, and once recipients outnumber payers the result is obvious...".

Do the Home-Owner-Ists seriously believe that under LVT, people will abandon owner-occupation and sell their homes to a landlord for a depressed amount, knowing full well that they will end up paying much the same amount of LVT as before plus an unknown amount in rent, losing the right to decorate or renovate as they please and losing some security of tenure? I dunno. Are they that brainwashed? Possibly...

9. Or let's assume that one of the eight owner-occupier households has an adult child or children living with them, and that being old softies, they don't make that child pay any rent or contribution at all? Will the other seven owner-occupiers go and knock on their door and complain that their adult child is not paying enough tax?

10. Probably yes, to be honest, but then the retort is: the couple with adult child are using their land more intensively/efficiently, it's like three people sharing a car on the way to work; they have to put up with the hassle but can split the petrol bill three ways. If we follow Home-Owner-Ist logic, then fuel duty would have to be graded according to how many people are in the car; if a single person fills up, it's 80p a litre, if there are two people in it, it's £1.60 a litre and so on.

A 52-year-old man has been airlifted to Brisbane after falling on his head from a six foot high fall as a result of being head-butted by a cow*.

The man was standing on top of the fence at Manar Park, Proston, about 1.30pm when the cow came from behind and head-butted his legs. The force from the cow lifted the man and he fell about eight-feet, landing on his head.

A spokesman for the Queensland Ambulance Service said the man fell on to a cattle grid. The 52-year-old reported hearing a crack and suffered instant pain.

He was helped into a private four-wheel-drive and taken 8km to the nearest property, where he was picked up by the AGL Action Rescue helicopter from Bundaberg. The man was airlifted to the Royal Brisbane Hospital suffering suspected spinal injuries, he arrived shortly before 4.30pm.

* The subtle distinction between bull and cow appears to be lost on them.

Mobile phone users in west Cumbria have been left without signal for weeks – because of a field of peckish cows.

The hungry herbivores broke through a fence around a mast at Moota, near Cockermouth and ate a vital link in the Vodafone line. James Waite, of Redmain, near Moota, said he had been unable to get a Vodafone mobile signal for nearly three weeks as a result...

Ed Balls’ series of proposals probably amount to a debt-financed boost to demand of £18bn, roughly 1.2 per cent of GDP. This includes his proposal to cut VAT back to 17.5 per cent, and his bid to move forward infrastructure projects, partly compensated for by yet another crippling £2bn-£3bn tax on banks (additional to Osborne’s own new tax) (1).

From a Keynesian perspective, it would make only a small difference. Even on its own terms, it is only just better than a gimmick. It certainly wouldn’t mark a major intellectual shift. Even if it did trigger more consumption, quite a lot of this would be on imported goods, which reduce GDP. A lot of the construction spending would be conducted via imported labour, thus failing to dent domestic unemployment by much. So even if one were to believe Keynesian models in an open-economy context, and pretend that the markets wouldn’t panic, the boost to GDP would be marginal, probably half a per cent or so in the first year and less in subsequent years.(2)

In the longer run, taxes would have to be hiked; given that Balls is obsessed with (3) cutting taxes on consumption (4), that would mean even higher incentive-destroying taxes on income and capital (5). It was interesting that Balls said yesterday that "the issue of land taxation is one which we should actively look at" – in other words, he is moving closer to the kinds of crippling wealth taxes (6) beloved of Vince Cable.

It is strange that Balls appears to think that what the UK needs more of today is debt-financed consumption; in reality it needs to rebalance towards investment, savings and exports. (7)

1) UK banks are in rude financial health (partly propped up with subsidies), swiping £2 or £3 billion back again (or not giving it to them in the first place) is not going to "cripple" them.

2) I'd pretty much agree with this paragraph. UK government spending is wildly out of control, it's far beyond the point where it can possibly add to output and is well into the level where it decreases it.

3) Note the use of the emotive word "obsessed". It just so happens that VAT is the most damaging tax, economically (whether Blinky wants to cut VAT for good or bad reasons is secondary). It's just that Allister Heath's paymasters are ultimately banks and so on, who are hardly affected by VAT, so he's following the rule that a tax is a good tax as long as somebody else is paying it.

4) VAT is NOT a tax on 'consumption'. Taxes on fuel, fags, booze are taxes on consumption thereof for the simple reason that demand is price inelastic and supply is price elastic; but a general tax on gross profits ('value added') of non-favoured industries is NOT a 'consumption tax', however you dress it up.

The fact that VAT appears on till receipts and not in company accounts is a red herring, you cannot change the economics with accounting rules. It is more or less impossible to design a general spending or consumption tax which doesn't act in exactly the same way as income tax, but far worse.

5) Tax on income = bad, but not as bad as VAT. He doesn't define what he means by "capital" so let's ignore that.

6) Aha, "crippling" again? "Crippling" to whom? Will all the mansions in London and the South East keel over sideways if Vince gets his way? Nope. Might their selling prices drop a bit? Yup. But who will ultimately end up living in them? Why, people who live and work in London, instead of them being forced to commute in from God knows where. Would that not a tad better for the economy? So who's been crippled here exactly, the poor South East home owners who see prices knocked back to 2005 levels (or whatever)? The people who will find it easier to trade up to somewhere more convenient for work? Who?

In any event, a tax on land values is NOT a tax on wealth because land values aren't really wealth and certainly not net wealth; they are a measure of the wealth that flows from non-land owners to land-owners, so the income and the expense net off to precisely £nil.

7) As a front man for the financial services sector, Allister loves high house prices because they enable/force people to take out more debt; some use the debts to buy the house (that's good for banks and vendors) and others use the new borrowings for, er, "debt-financed consumption". It's a simple fact that had house prices not risen so much, there would have been less debt-fuelled consumption - during the boom years, mortgage equity withdrawal alone added about six or seven per cent to people's disposable incomes.

Monday, 26 September 2011

There was a good turnout for last week's Fun Online Poll, thanks to everybody who took part. Results as follows:

How often do you wash your car? The rain washes it - 35%More than once a year - 25%I don't own a car - 20%Shortly before I want to sell it - 8%More than once a month - 4%Other, please specify - 7%

I must admit there was no reason for running this poll apart from me being nosey, and I'm delighted to see that I'm in the au naturel majority on this one.

I am surprised at how many respondents say they don't own a car: I'm really not sure what to make of that. Bonus points for bestmost inflammatory comment goes to John Pickworth: "Car washing, like ironing clothes is a waste of life."--------------------------------This week's Fun Online Poll, which may end up being superseded by events, is "How much longer will they manage to keep Greece in the Euro-zone?"

The whole thing strikes me as beyond the point of insanity - Greek's outstanding government debts is in the order of €350 billion, and they can easily afford to pay about half of that, so why on earth do the EU, IMF, ECB, EFSF whoever, need a fund of €440 billion, which They magically hope to 'leverage up' to €2,000 billion to cover the losses? Who in his right mind is going to lend a €440 fund, which is more than enough to cover the losses, another €1,560 billion, knowing that a tenth of that money will just disappear in a puff of smoke?

For sure, They also want to bail out French and German banks, and to bail out the people who lent money to the other PIIGS etc, but why subscribe to something which is guaranteed to lose you money? Unless you're investing somebody else's money and are on a decent kick back, of course? Why do They think that we will fall for this? Questions, questions...

Mr Browne dismissed Business Secretary Vince Cable's idea of a land tax as "cloud cuckoo land" and unworkable.

He told ConservativeHome website: "Far better would be to introduce higher bands of council tax above band H. Introduce a band I for properties over £500,000, a band J for properties over £1 million - even a band K for properties over £2 million. It would be easy to introduce, simple to collect, wouldn't complicate our tax system, and will cause far fewer hard luck stories... It is patently unfair that a family with a three-bed semi in Manchester incur the same band H council tax as a billionaire industrialist in his £100 million palace in west London."

One of the nasty things about Council Tax is the fact that the bands are so wide, i.e. homes at the top of Band C were worth 40% more than those at the bottom thereof (as at April 1991), in Bands D to H the gaps are from 31% to 45%, and Band I is unlimited (this is for homes worth > £424,000 twenty years ago, surely there must have been a few even then?). Thus the ratio between the cheapest homes in Band I and the most expensive in Band A is just under ten-to-one.

UPDATE: CM in the comments reminds me that Band I only applies in Wales, so the ratio in England is only eight-to-one. Which would be a bit like capping the income tax payable by the highest paid footballer in the Premier League at eight times the amount payable by a sales girl in the ticket office or something.

Excel tells us that if we had twenty six Bands, from Band A to Band Z, and a 'band width' of just over 20%, the ratio between the bottom of Band Z and the bottom of Band A would be a hundred-to-one (=1.2023^25). Whether we rank homes by selling price, underlying land value, total rental value, site-only rental value or any combination thereof (interpolating between them is quite easy) is neither here nor (as is what we do with homes which fall below the bottom of Band A), but having more, narrower Bands seems to me to be a much better way of doing it.

For sake of argument, Council Tax in new Band A would be £300 a year and in new Band Z it would be £30,000; or it might be £100-to-£10,000 - depending on how much you need to raise to replace other taxes and how many homes fall into each Band etc.------------------------See also last week's Spectator: Why mansion tax makes sense, if only for the excruciating Killer Arguments Against LVT, Not.

A warning about the dangers of rutting stags was issued by the Royal Parks today after three separate attacks in London.

In one case a young girl was taken to hospital with head, wrist and chest injuries after being gored by a stag in Bushy Park, Richmond. A man in his fifties was also taken to hospital after being attacked in the same park. In a third attack a woman, pictured here, was left "badly shaken" after being knocked to the ground as she walked through the park on Friday morning...

Tony Blair is facing fresh questions over his role as a Middle East peace envoy after claims that he has used the position to promote lucrative business deals for clients of an investment bank that pays him £2million a year.

As a representative of the Quartet –the UN, the EU, the U.S. and Russia – the former prime minister is tasked with fostering peace between Israel and Palestine.

But he has also used the post to promote two contracts worth more than £1billion in Palestine with British Gas and mobile phone firm Wataniya – both major clients of J P Morgan, the U.S. investment bank which employs him as a senior adviser.

Simon Ashmore has five buy-to-let properties in Nottingham and Hull... He said 'It's a cracking market for landlords at the moment. Mortgages are cheap and rents are high'... The tennis coash, pictured right with his fiancée Sarah Norris in Nottingham, rents to people on housing benefit. He says that these tenants provide the highest yields - that is, rent as a proportion of the property's value.

Ed Balls will bid to boost Labour's economic credibility by vowing to spend any windfall from the sale of bank shares on paying off the national debt.

Genius.

We know that it was Labour who a) allowed the banks to get into such a mess and b) made the decision to throw taxpayers' money at them and that as things stand, the taxpayer has suffered a huge loss from his or her forced investment in banking shares.

We also know that some pol's have been merrily promising to give the shares back to the taxpayer, or to create a People's Bank etc. So Blinky isn't promising this sort of thing, but under what circumstances will bank shares rise above the price that his government paid for them?

If the government were in a hurry to show a profit on the bank shares, what would it have to do? It would have to allow the banks to become much more profitable, by encouraging households to take out much bigger mortgages and get deeper into debt. But beyond a certain point, bank profits aren't profits at all, they are just rental payments extracted from mortgage payers. It's a negative sum game.

So it would be a lot cheaper and effective to increases taxes to repay the debt, rather than to blow another credit bubble, siphon vasts amount of money to the banks, a small part of which goes into increasing the share price in order to pay off a tiny fraction of the national debt.------------------------In any event, the total cost of the taxpayers' forced investment in RBS and Lloyd's is widely quoted as being £66 bilion, and they are currently standing at about half that; so even if they were to treble in value from today's date, the book profit would only be equal to six months' worth of deficit spending (or about five per cent of outstanding UK public sector debt).

There was a fine article in yesterday's Daily Mail on government "over spending" on certain, ahem, "projects" which is well worth reading in full. I'll restrict myself to this snippet...

Four years after it should have been finished, we have spent £6.4 billion — or £300 for every household — on an incomplete patchwork of incompatible [NHS computer] systems.... two companies were paid £1.8 billion for the project. But one failed to deliver the products ordered, while the other, BT, is being paid £9 million to install systems for the NHS while charging £2 million for the same systems elsewhere...

... former Labour Health Secretary Patricia Hewitt flits from overseeing the hopeless NHS computer project to a highly-paid directorship at BT. Do we laugh or cry?

The Mail is a conservative paper, so giving the previous Labour government a good kicking comes naturally to them. However, they are not mucking about, here are a few other headlines from the same edition, in descending order by value...

If you look at all these examples in the round, and cross reference them to actual HM Treasury figures, it appears that about a third of all government spending (certainly more than a quarter) falls into these categories, i.e. the amount being stolen each year is rather more than the annual deficit.

All of which makes a mockery of Kelvin Mackenzie's assertion (in the same edition!) that all Cameron needs to do is "Cut pensions, slash benefits and stop spending money to the skint elsewhere in the world" (the last one is definitely a good idea, but we just don't spend that much on old age pensions, and barely anything on cash benefits).

There's a thread over on a lawyers' discussion forum concerning an article in this week's Economist, the main thrusts of which are that a lower flat tax on all incomes is better than having very high rates on some incomes to subsidise other people's tax breaks (agreed) and that "one option would be to shift more of the burden from income to property, which would collect more from the rich but have less impact on their willingness to take risks. The “mansion tax” proposed by Britain’s Liberal Democrats would thus do less damage than the 50% rate."

It's not clear to me why The Economist refers to land values as "property" (it is but one form of "property" and it is more of a "legal entitlement" rather than "property" in the narrow sense), and overlooks the fact that most of the people who would be paying it (in the short term) are only "rich" because of this legal entitlement and not because they are "rich" or actually wealth creators in any real sense (i.e. if you are a bus driver, a brick layer or a brain surgeon, you create wealth by doing what you're paid for, driving buses, laying bricks or operating on people's brains respectively; nobody creates wealth by merely owning land which goes up in value), details, details.

Inevitably, people on the thread confuse LVT with a tax on "wealth" (it's not, it's a sophisticated form of Poll Tax) and play the Poor Widow Bogey, at which The Sumo King hits back with this:

As regards your poor widow neighbour;

It is her fault that house prices went up - it's exactly these people who voted to get rid of Schedule A tax and Domestic Rates, it's exactly these people who constantly voted to restrict new construction to a trickle. It certainly is her fault if she has "little cash", it's called "not saving up while you are working". And if she wanted, she could be sitting on a huge great pile of cash, so this sort of poverty is entirely self-inflicted.

What such a tax would do is encourage Poor Widows In Mansions to do the economically rational thing and down size a bit to somewhere costing "only" a few hundred thousand, freeing up huge great piles of cash for them to really enjoy their last few years!

And, if we are that worried presumably we could have an old lady exemption that might be slowly phased out? The older generation cannot go on holding the younger generation hostage and demanding that the younger generation pay for them because it was not cool to save in the 60s!

Now...

An LVT makes sense, you are taxing the value and the value is not generated by you, the value is how much society wants to live where you do, nice roads, quick police, good hospital, high amenity...

It would not be an extra tax, it would be instead of income tax and pretend income tax (which we still call NI), probably IHT and if at all possible VAT (or a chunk of VAT), then the more you work the more you earn and if you don't want to pay tax you go and live somewhere awful and pay 20p tax

Saturday, 24 September 2011

The author of the actual post, exaggerating wildly, said: "the popular view is that although the landowner has paid for the land, it’s not really theirs and everyone should have access to it whenever they feel like it without having to ask anyone for permission."

WoaR responded with this:

It’s English property law. They don’t own it. Only the Queen does, and she has sold a number of rights over it to them. She (that is, the Crown) defines what right(s) it wants to sell and in this case it was a parcel of land in the green belt which can be cultivated or not, but what it can’t be is turned in to a housing estate without permission.

There is no double-think if the conditions exist at purchase. So, the legislation which imposed a right-to-roam on people who had not bought land with that condition is something one can meaningfully argue about.

If, however, you buy something with a national monument, protected tree or various wayleaves, covenants or restrictions or listed buildings on it, then that is part of the deal. For instance, up until the mid-90s if you bought a house in a mining area there was a provision that reserved mineral rights to the National Coal Board, so you couldn’t go sinking a mine in your back garden.

There’s not double-think here – only a mistake as to what ownership over land legally means. It isn’t the same as ownership of other items, which is why there is a separate branch called Land Law.

So:

Do you own the land you’ve paid for or not?No. The Crown owns it.

If you don’t own it, what have you paid for?You have paid for a number of rights over it which may or may not be honoured in perpetutity, depending on what it said on the deal and how long the Crown lasts for. The main right is usually the right to exclude others, but as we’ve seen, that can be modified.

As regards Dale Farm, the crucial part is that the disputed parcel of land is defined as green belt, meaning the land was bought at the price of agricultural land, not land with outline planning permission for 50 dwelling plots on it. The green belt status was known about and there was no question of them getting further planning permission following DF1.

From an article in the Daily Mail about immigration and the welfare system:

Men also cheat the system by bringing brides from abroad as nannies for their children, or as carers for a sick relative. The bride gets a year’s visitors’ visa, disappears into a tight-knit local community, and is entitled to receive welfare hand-outs.

If you're claiming welfare, then you've not 'disappeared', surely? Does the government not think to cross reference welfare applications and lapsed visas or something?

I vaguely remember that under the Labour government they stopped 'counting them out again', so they didn't know who was still here (and whether the Lib-Cons have reintroduced this, I do not know) but wouldn't applying for welfare not be an opportune moment to identify a few (or at least deter them from trying to claim welfare)?

Friday, 23 September 2011

But according to The Metro, it already happened a couple of days ago:
"The satellite is the biggest Nasa craft to fall to Earth since Skylab in 1979." continues The Mirror breathlessly (same link as above).

According to the BBC, a similar incident happened two years ago:According to The Evening Standard, there was another three years ago:And according to The Daily Mail, there was another one six months before that: Buses... the new cows?

THE HOUSING boom and other changes in asset prices could have led statisticians to overestimate the contribution of financial services to GDP, according to the Bank of England’s quarterly bulletin, out today.

As the sector grew twice as fast as the economy as a whole, its position as a driver of growth is not in question*, but the exact pace is debatable.

A difficulty with rising house prices comes when indirectly measuring banks’ output. One main measure, financial intermediation services indirectly measured (FISIM), is based on deposits and loans. It assumes that the value added is represented by the margin banks make.

This is never going to give perfect results**, and the report suggests it may have become less accurate when house prices boomed. There was no increase in the number of loans approved in the boom years, but the size of those loans increased. “That suggests little change in output, but the stock of mortgage lending … rose by almost 60 per cent” – which could artificially inflate the value added by the sector.

The report believes up to 0.1 per cent of GDP each year may have been wrongly attributed to the sector, which could knock total GDP slightly.

* Oh yes it is, very much so.

** From here: [The banks] form a powerful lobby since financial services contribute about 10 percent to the UK economy. Banks DO NOT and CAN NOT possibly contribute that much. For sure, they run a very efficient and convenient payment system which might well add one or two per cent to GDP, but the bulk of the ten per cent which goes through their sticky fingers is merely rents (which they call 'interest') they collect from the real economy and then pay out again (back to savers or to shareholders or to the bankers as bonuses). At the margin, banking reduces the size of the economy, i.e. what some people call a 'financial crisis'.

Changes in agriculture during the Elizabethan period led to people leaving the countryside and their village life to search for employment in the towns. The wool trade became increasingly popular during the Elizabethan age, which meant that land which had been farmed by peasants was now dedicated to rearing sheep and a process known as land enclosure meant that the traditional open field system ended in favour of creating larger and more profitable farming units which required fewer people to work on them.

The number of jobs decreased and people were forced to leave their homes in search of employment in the towns.

The Poor Law - 1572 Act

In 1572 the first compulsory poor law tax was imposed at a local level making the alleviation of poverty a local responsibility. Each Parish was responsible to provide for its own aged, sick and poor.

The Justice of the Peace for each parish was allowed to collect a tax from those who owned land in the parish. This was called the Poor Rate. The Law stated that charity for the relief of the poor should be collected weekly by assigned collectors. The money was used to help the 'Deserving Poor' - anyone refusing to pay was imprisoned.

[Note: Business Rates were first collected under this law and are still going strong today; Agricultural Rates were phased out in the first part of the 20th century and Domestic Rates in the latter part]

The Poor Law - 1601 Act

The Poor Law Act 1601 formalised earlier practices making provision for a national system to be paid for by levying land taxes. The 1601 Poor Law act made provision:* To levy a compulsory poor rate on every parish* To provide working materials* To provide work or apprenticeships for children who were orphaned or whose parents were unable to support them* To offer relief to the 'Deserving Poor'* To collect a poor relief rate from land ownersParents and children were responsible for each other, so poor elderly parents were expected to live with their children.

Thursday, 22 September 2011

Allister Heath: The more rich people, the more tax receipts. Paradoxically, of course, that means axing the 50p tax rate. Just as crucially, it must not be replaced by any other tax and certainly not by a wealth tax or mansion tax.

All sections of society already pay far too much tax. A wealth tax would be a moral and economic disaster, double or triple taxing income and making a mockery of property rights. We need growth and jobs, not hate and punitive taxation. It is time to halt the war on wealth.

What he refuses to accept is that a Mansion Tax is like a very sophisticated form of Poll Tax - it is more or less the opposite of a Wealth Tax (whatever that is); if you reduce the top tax rate/s (hooray for that, let's have a flat tax on earned income) and replace it/them with a Mansion Tax (or more Council Tax bands, or whatever) which is what is being seriously considered, then all things being equal, that is good for higher earners and will make London more attractive to them.

Allister Heath, again: There is something bizarrely enjoyable about Liberal Democrat conferences. It is the occasion to... being nasty to people who own or hope one day to own a nice home in London or the home counties.

Ho hum, editor of a financial newspaper, doesn't realise that a Mansion Tax is just like having a higher interest rate on buying a house. So all things being equal, house prices might fall slightly but the net incomes of those most likely to buy such houses goes up, so this switch would be a massive boon to people who "hope one day to own a nice home in London or the home counties".

Not sure if his maths is that good either. There is a fixed number of nice homes in London and the home counties, ergo what's good for current owners is bad for future potential owners. It is more or less impossible to think up a policy which is bad for both simultaneously because their interests are more or less diametrically opposed.

City Insider, page 48 of today's Evening Standard e-edition: SO what the Lib-Dems now want is to encourage high earners to buy smaller homes in the UK and larger ones abroad, which will do nothing to help the UK economy or public debt. Why don't they put up a big sign saying "Please go and work in Singapore or Dubai or Geneva" instead?

Actually, they don't need to. I think hedge funds and private equity firms are getting the message and it is only a matter of time before a big bank leaves: HSBC, Standard Chartered or Barclays will probably be first.

It's ironic that City Insider names Geneva as a place where these supposed wealth creators might bunk off to - as we well know, Switzerland's income tax rates are lower than ours (good) and it taxes residential land and buildings at higher rates than the UK does, and for really rich foreigners, there's an option to not declare your income at all, you just pay tax every year of about 5% - 8% of the value of the house you live in. There are still plenty of rich people who move there and live there, but actual evidence counts for nothing in a propaganda war.

I observe that currencies seldom go above 1.2 or below 0.8 against the basket, most of them spend most of the time between 0.9 and 1.1. On this basis, the Japanese Yen does look pretty close to the upper limit.

The 80-year-old owner of an exotic animal farm was hospitalised after he was subjected to a brutal 15 minute assault - by a kangaroo. John Kokas was repeatedly punched in the face and upper body by the aggressive 6ft, 200lb three-year-old red male.

He had reared the animal, which had never attacked before, since it was six months old - but now faces having to put it down... Experts believe Tuesday's attack, at the Kokas Exotics Animals Farm outside Green Camp, Marion County, Ohio, occurred because the beast was protecting a female on heat.

"From our initial investigations it appears that about 9.30am, Mr Jameson has* left his home to tend to his cattle on his parents' farm. At about 4.35pm, having had no contact, co-workers have searched the farm area and have located him lying trapped beneath his quad bike on a steep and boggy hillside. It appears that while negotiating the very steep incline, the quad bike has* overturned and landed on top of him."

The hillside is not visible from the roadside, police said. Officers are working with the Health and Safety Executive (HSE) to investigate what the spokesman described as a "tragic accident."

It appears that cows were not taken in for questioning.

* The use of the present perfect ("has left") instead of the past perfect ("had left") really annoys me, and it is becoming more and more widely used. In the sentences quoted, simply saying "Mr Jameson left" or "the quad bike overturned" would have been better anyway.

If technical analysis (which means recognising patterns in charts) predicts movements correctly, the FTSE 100 index (i.e. most UK quoted shares) will trade in a narrow band for the next few days and then drop by about a thousand points.

Wednesday, 21 September 2011

UKIP's press office asked me if I could respond to HM Treasury's Consultation Document on merging income tax and Employee's National Insurance. I set aside last Sunday afternoon for a bit of fun with numbers, but didn't get very far: the document itself kicks off with this (click to enlarge):I duly responded as follows:

Dear Sirs

Your Table 1.A suggest that you are not taking the matter at all seriously:

Against 'Entitlements provided' you state that Employee's National Insurance gives 'Entitlement to contributory benefits, such as state pension; also helps fund the NHS'.

You know as well as I do that Employee's NIC raises less than £50 bn a year, but the state pension costs about £70 billion a year and the NHS costs over £100 billion a year. So there's a bit of a mismatch there.

Not only that, but Iain Duncan Smith proposed - quite rightly in our view as this was a key part of UKIP's Pensions Manifesto for the 2010 General Election - that the contributory principle for the state pension should be scrapped and the state pension and Pensions Credit be merged into a flat rate Citizen's Pension.

As to the substantive question 1, we agree wholeheartedly that there is no difference in principle or in practice between income tax and National Insurance, and that the two should be merged into a flat-rate tax on all incomes as soon as possible.

Let's use King, Smith, Williams and Van Boening's 1993 definition: a bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values".

At present the US government can borrow money over ten years and pay under 2% a year. Germany need only pay 1.8%. The UK can borrow at 2.3% – considerably lower than inflation, which sits between 4% and 5%, depending on what measure you use. (And bear in mind that real inflation as suffered by the man who wants to eat, drink, travel and keep warm is considerably higher.)

If somebody approached you and said: "Psst. Have I got an investment opportunity for you! Lend me money and I'll guarantee you'll lose 2% to 3%, year in, year out." Unless that somebody was extremely charming – or armed – it's unlikely you'd see this as an 'opportunity'.

Yet, as Allister Heath writes in The Spectator this week, "UK and American governments can be loaned money – and, in effect, be paid for the privilege. This is crazy. It shows that the bond markets are well and truly in major bubble territory, their valuations as absurd as the rocketing subprime properties of yore."

*sigh*

The basic rule for banks is "loans create deposits" and for governments, the rule is "spending in excess of tax revenues creates debts/borrowings". It's not the case that the government borrows the money first and then spends it, the simple act of spending creates the borrowings. It's basic Modern Monetary Theory.

For example: you're a quangocrat or a corporatist and your chums in the government ask you to do some Very Important Consultancy Work for £400 million, you'd be daft not to accept the offer. They tell you that they can't pay you in cash, but would £400 million in gilts, redeemable in ten years' time be OK?

You say yes, of course, but maybe you bump up the price to £496 million to cover your inflation loss. You then appoint your chum in government as a director of your company, bung him £100,000 "emoluments", maybe make a £1 million donation to his Party and everybody's happy.

A runaway steer* has stopped traffic on a major highway, hurtled over a brick wall and damaged two police vehicles during a chase that had four Arizona law enforcement agencies scrambling. The male bovine escaped from a livestock trailer on Tuesday morning on Interstate 8 just east of Yuma in south-east Arizona, Yuma County sheriff's Captain Eben Bratcher said.

"It was chaotic," Mr Bratcher said. "It was running around in traffic on the interstate, which is why law enforcement got involved as quickly as it did. There was a lot of us out there chasing this thing around."

He said the steer bounded over one police car and later barrelled over a brick wall, knocking some bricks down. A sheriff's deputy eventually was able to rope the steer from the bed of a pickup truck about a half-hour after the escape as another deputy drove alongside it**.

The driver of the trailer, which had five other steer inside, was getting on the freeway when he noticed that a side door was ajar. He pulled over but one of his charges got away before he could shut the door.

"It kicked the crap out of the truck and dented it up," Mr Bratcher said. He said the nimble steer was uninjured and was returned to its owner, a Yuma man who continued on his trip to take the steer to a feed lot.

Bratcher said the animal was a roping steer, the type often featured at rodeos. At first he thought it was a Texas longhorn. "It's ornery," he said. "They're not known for their docile nature."

* A steer is not a cow, it is castrated bull.

** And how many English coppers would manage that? I'm sure it wouldn't be allowed under Elfin Safety rules anyway.

Unionist politician George Savage is lucky to be alive after being saved from a near fatal cow attack by his trusty Collie dog Jack...

George was at the farm with son Kyle tending to a calving cow when another cow charged at him, flinging him several feet up into the air. That’s when George’s quick-thinking collie Jack intervened, running in the other direction to divert the cow from his master.

Joy said: “The cow started chasing the dog and that gave George time to get away because the cow was getting ready to charge him again" Joy said it could take weeks for her husband to recover from his injuries. “He’s trying to keep mobile and as he’s Deputy Mayor this year, he’ll just have to take it easy for a while"

On page 46 of today's Evening Standard (the original letter was edited slightly, here it is as published):

The more complicated the tax system is, the better for tax accountants like me, but no-one else benefits. There are large deadweight costs involved with the top rate of tax in terms of the numbers trying to avoid it; plus the important principle to outweigh any of those mentioned by Sam Leith (September 19), of not punishing people for working hard and being honest.

A mansion tax - or a land value tax, for all practical purposes very similar - would be far fairer in that property over a certain value is a luxury and council tax as currently levied is inconsequential for properties over £300,000-£400,000. If there are concerns about the impact on widows living in properties that have risen hugely in value, exemptions could be made for anyone over the over-65s, as currently happens with rateable value in Northern Ireland.

The ideal would be to replace inheritance tax, stamp duty, council tax, the TV licence fee and Insurance Premium Tax with a one per cent tax on the value of property: each of these current taxes weighs either disproportionately on the poor or on the rich.

India's holy cows are turning out to be vengeful deities, according to new figures showing the number of bovine attacks is on the increase.

New figures show seventeen cases of attacks on people in the first half of this year – more than the total number of bites since 2004. Animal rights groups blamed a sharp increase in the number of people bitten by cows and buffaloes in the capital New Delhi on a surge in building projects which have blocked their traditional grazing routes and left the creatures bewildered and panicked.

Campaigners said many of the cows and buffaloes wandering Delhi's roads are owned and neglected by illegal dairies who are concerned only about their milk production. Vasanti Kumar, of Stray Relief and Animal Welfare (STRAW) said the situation had been created by the failure of local officials to keep cattle off the streets, and by a reverential public which feeds them...

I had assumed that the violence of European cattle may be down to them wanting to get their revenge on us for slaughtering millions of them year and turning them into steaks, which is fair enough, so what excuse do the Indian cattle use? They get worshipped like, er, gods. Is their excuse radical NIMBYism?

Millions of hard-up householders have risked insulting Chris Huhne by saying that he is to blame for high energy bills.

Families said that the Energy Secretary 'does not allow energy companies to bother' to hunt for the cheapest sources of fuel, but would rather spend more time making them look for hugely overpriced windmills and wrecking what's left of the UK's heavy industry with a Carbon Tax.

They also said the Energy Secretary could save up to £3,000 in legal fees if he didn't get involved in speeding incidents and could use the spare money to go on a short weekend mini-break with the woman he dumped his wife for.

Domestic energy users said: "He frankly spends less time shopping around for an energy source that's on average more than £500 a year cheaper than what we are being forced to buy than he does shopping around for a £250 toaster from the John Lewis list. Or for something like £250 billion's worth of windmills and other green tomfoolery. If he got that in perspective and said, 'OK, we are going to save a huge amount of money shopping around' [we] could save very substantial amounts of money,' they said in an interview with the Times.

Households said Mr Huhne spends 85 per cent of his time dreaming up new ways of making gas and electricity eye-wateringly expensive, and challenged him not to 'just sit back and take all the bungs from the windmill and power lobbies and succumb to the myth that all sources of energy cost the same'. Their comments came after energy firm EDF announced a 15.4 per cent jump in gas tariffs as it became the last of the major suppliers to put up prices...

Teenagers who watch films showing actors smoking are more likely to take it up, new UK research suggests...

Fair enough, that's a hypothesis which might or might not be true.

... The latest research, published in the journal Thorax, looked at the potential influence of some of the 360 top US box office films released between 2001 and 2005, including movies like Spider-Man, Bridget Jones and The Matrix, that depict smoking.

Adolescents who saw the most films depicting smoking were 73% more likely to have tried a cigarette than those exposed to the least. And they were 50% more likely to be a current smoker.

Wot? WTF?

Most people watch lots of different films, on the telly, on DVD, at friend's houses, in the cinema. Most people have seen a cross section of all manner of films, a few of which show somebody smoking and most of which don't. I'm sure a lot of people wouldn't be able to remember the names of most of the films they'd seen in the past year (if you include ones you watched on the telly).

It is surely inconceivable that some people deliberately select films in which people smoke, and it seems statistically unlikely that out of a hundred films we watch each year, that some people would see mainly smoking films and others would see none.

So the only way to makes sense of that last paragraph is to assume that people who "watch the most films" also tend to smoke, full stop. In other words, people who enjoy the relaxation, escapism of films are also quite likely to enjoy the relaxation, escapism of smoking. By contrast, people who like going jogging are probably least likely to smoke.

Monday, 19 September 2011

There's a nice article in this morning's City AM on the topic, I've scanned in the accompanying map (click to enlarge):The correlation is basically this: cutting 45 minutes from your commute time adds £75,000 to the price. If you estimate capital+interest repayments at 5% of the mortgage, knock off the £3,000 saving on your annual travel-card and divide that by the 350 hours not spent on the train, that all suggests that people value their own time at a paltry £2 per hour. Other estimates suggest more than, but let's work with the information we're given.

I'd completely agree with the first two, and as Jaffa pointed out, after a few years of trading, there is no difference between them.

I'm relieved to see how few voted for 'Government grants', which don't make sense to me (or Lola). Not only is the government is notoriously bad at picking winners but such grants can only be funded out of higher taxes on everybody else, which is a distortion on both sides of the equation and eats in to the best type of finance - retained profits.

I don't know why so many people went for 'loans secured on land and buildings'; if you borrow money to buy land, then you aren't investing in 'the business' you are just paying interest (rent) the purchase price of the building (which in itself is pre-paid rent). None of that money goes into the business (this doesn't apply to loans to build the physical building - see below). And if a not-so successful business doesn't make retained profits and has to borrow on the strength of unearned income (latent capital gains on land and buildings) then that's another distortion - far better for banks to lend to businesses on the strength of the underlying business and not on the back of windfall capital gains.

Finally, I'm a bit disappointed that so few choose 'asset finance' (which include financing the cost of the actual building, but not the land). For these purposes, it doesn't make any difference whether you rent a car, finance lease it or buy it on hire purchase, you make your money by using the car in the business, and not by simply owning a car (unless you run a car-hire business, of course). Sean in the comments concurred.-----------------------------------Sticking with cars, how often do you wash yours?

The party’s annual conference in Birmingham voted for reforms to drugs laws which could also lead to Amsterdam-style cannabis cafes opening across Britain. The decision means it is now official Liberal Democrat party policy, to which leader Nick Clegg is bound – although the Home Office said it had ‘no intention’ of changing the laws.

Lib Dem MEP Chris Davies told delegates: ‘We have had drug prohibition for 50 years and drug use has increased. The only way to stop the criminals is to undermine the supply chain by taking away their income.’

Party members said possession of any controlled drug should be a civil offence which would see transgressors given health advice and education by social workers. They also called on the government to consider a framework for a ‘strictly controlled and regulated’ cannabis market with government-controlled retail outlets.

The Lib Dem proposal claims* that decriminalising the possession of drugs for personal use in Portugal has not led to a rise in abuse. It says ‘heroin maintenance’ clinics in Switzerland and the Netherlands have delivered health benefits for addicts.

* Why use the word 'claims'? As far as I am aware those statements are verifiably true.

Sunday, 18 September 2011

I'm no expert in these matters, but I'd describe it as a downmarket hodge-podge of Groundhog Day and Eternal Sunshine of the Spotless Mind featuring Drew Barrymore and a bloke who looks a bit like Ben Stiller, but if you pay attention, it turns out that the poor lass lost her memory because she crashed her car swerving off the road to avoid hitting a stray cow.

I cheerfully admit that simply pointing out that 'land is different' is not in itself a definitive argument in favour of taxing land values (and a few narrow classes of other government-protected monopoly rights) rather than anything else, because there are those who say that merely because something works in practice does not prove that it works in theory. But the reverse logic that 'land is an asset like anything else and therefore if you are going to tax land you have to tax everything' simply does not wash. For example:

Roger Helmer at ConHome: "Fifth, if we can tax mansions, what about other property? Cars? Racehorses? Pension funds? ISAs? Where do we stop?"

Or IanB in the comments here recently: "Look Mark, the whole economy is about allocation of scarce resources. Anything that isn't scarce ends up being free because supply is infinite. This whole "land is scarce but other products aren't so land is different" thing is inept reasoning, and if you are honest you have to use the same reasoning to conclude that anyone owning a scarce resource-which is just about everything from cheese to chalk- is a "monopolist" making unjust profits."

This notion that land is like any other asset or that rental income (cash or non-cash) is like any other source of income is quite clearly hokum. Let's start with 'cheese', but we can do the same exercise for cars, racehorses, pension funds or chalk if you really want:

1. As the economy grows, the price of basics/manufactured items tends to fall relative to wages (because we are more efficient or more productive) but land values rise relative to wages.

2. This is mathematically true and verifiable - when the Mini was first made, it was sold for £500 and a house cost £2,000. Nowadays you can buy a small car that's far better than a Mini was then for £7,000. You cannot buy a house for £28,000 today (or only in the most depressed parts of the UK).

3. If there were some horrible situation, like pestilence, or war, or all our young people emigrating abroad, then cheese prices (in the UK) would rise and house prices would fall.

4. There are no NIMBY restrictions on how much cheese can be produced; there are not even any practical or economic restrictions (or if there are, we are nowhere near those upper limits).

5. A piece of cheese has inherent value. A piece of land has no inherent value, it is just mud and stones. Its value depends entirely on where it is. Cheese with planning permission is not worth a hundred times as much as cheese without planning permission. The value of cheese or chalk does not change depending on where it is. A piece of cheese in Newcastle is worth the same as piece in Mayfair.

6. The only instance where cheese behaves a little bit like land is where the producer can exclude other suppliers from the market. The price of a cheese sandwich in the supermarket is £1.50, but on a train you are a captive audience, there are no competitors and they can charge you £3, take it or leave it (what I refer to as 'embedded rent').

7. If one man wants a piece of cheese he places no burden on others who also want one. If there were no demand for cheese, it would not be made in the first place. Not only is the amount of physical land fairly fixed, it does not need to be manufactured, it is just there. There is a natural tendency for people to want to live in urban areas (more jobs, more amenities); there are centripetal forces, which drive land values in urban areas ever higher.

8. Supply of cheese rises to meet demand. In demanding cheese, I am creating employment opportunities for cheese makers and retailers. If demand for cheese goes up, then that does not push up the price, it creates even more jobs.

9. Cheese producers and suppliers are fairly competitive and do not make super-profits. Demand for cheese is what it is, and as long as the price offered is more than the cost of producing and selling it, it will be produced and sold.

10. Land rents quite clearly reflect landowners’ monopoly power (or their share of the cartel’s monopoly power). A cheese factory in the middle of prime Surrey commuter-belt will be no more profitable than one outside Swansea (because they compete with each other), but land in Surrey commuter-belt will always command a much higher price than on the outskirts of Swansea. Two landowners in different parts of the country do no compete with each other, and two landowners of neighbouring plots do not compete either – they are members of the same mini-cartel.

11. Do cheese prices increase when interest rates fall and vice versa? Does the price of cheese depend largely on credit conditions?

12. Is there an eighteen-year credit-driven boom-bust cycle in the price of cheese, which always ends up with a financial crisis and a recession?

13. The supply of cheese rises to meet demand and prices stay stable (or might even fall because of economies of scale). If demand for land goes up, the full benefit of that increased demand accrues to land owners as supply of land in desirable locations is fixed.

14. Does The Daily Mail celebrate when the price of cheese goes up?

15. Do countries fight wars over cheese? Did the Normans invade us or did we invade North America to secure cheese supplies or did they/we just announce that the land belonged to them/us? For sure, countries fight wars over natural resources, such as water or oil, and in olden times may have fought over valuable agricultural land (needed to make cheese) but that is secondary.

16. A tax on cheese is shared between supplier and consumer, leads to a fall in cheese output/consumption, destroys businesses and jobs, makes us all poorer. The tax leads to evasion and smuggling and thus pushes up the tax rate on everything else to compensate.

17. A tax on land-location values does not affect the amount of desirable locations. It is paid by the occupant and born by the owner but cannot be passed on in higher prices, so it does not reduce output or increase prices one iota.

18. This is evidenced by the fact that the retail price of consumer goods is much the same all round the country, even though the Business Rates payable by shops in desirable city centres is a vast multiple of that paid shops in less desirable locations.

19. If all businessmen and workers decided that their income was taxed too heavily and went on strike to avoid earning money and thus having to pay tax, the country would grind to a halt. If all landowners decided that their rental income (non-cash rental income in the case of owner-occupiers) was taxed too heavily and decided to abandon their land and stop collecting rents, then the government would acquire the land by legal default and it could rent it all back to us and would have far more revenues than it could ever raise in income tax etc.

20. Ownership of land tends to become concentrated in fewer and fewer hands over time - look at the USA, they started off with everybody owning a smallholding and where are they now? Land ownership is almost as concentrated as it is in the UK. This is precisely because land ownership is so lightly taxed. Taxes on cheese are not particularly high, as it happens, so let’s look at taxes on motor vehicles. In the UK, they are very high indeed, about £50 billion year (mainly on road usage, i.e. fuel duty) on vehicles worth maybe £300 billion. As a result, people drive smaller cars or drive fewer miles than they otherwise would do, roads are used more efficiently and there is, unsurprisingly, a much wider spread of car-ownership than there is of home-ownership.

21. There is no 'community' input into the value of a piece of cheese - the cheese is made by a small group of individuals (farmer, factory, supermarket). There is a producer surplus (profit) and a consumer surplus.

22. To make money from cheese, you can't just make one piece – or buy one piece - and then sit back and collect rent for the rest of your life, you have to make and sell more cheese every day. A piece of cheese deteriorates and goes off, it does not slowly increase in value. It needs to be stored and looked after. Cows and machinery and lorries and fridges have to be regularly used and maintained at huge cost to remain profitable.

23. This is quite unlike bare land, which can increase in value enormously without the owner lifting a finger, all he needs is a register in HM Land Registry, a legal system prepared to evict squatters, an exemption from Business Rates or Council Tax and for the economy to grow or the amenities provided around his site to improve and he earns money in his sleep.

24. A tax on land values tends to depress buying and selling prices without affecting gross rents, thus dampens the boom-bust cycle without discouraging new development. See Business Rates, which is the closest thing we have to LVT, see also the fact that house prices were low and stable between 1950 (once the supply shortage caused by bombing in WW2 had been overcome) and the late 1960s, a period in which we had Domestic Rates and Schedule A tax (which between them amount to crude forms of Land Value Tax). High taxes on incomes, profits and output certainly do no dampen the boom-bust cycle, and if anything greatly worsen the impact of the bust/recession periods.